Bullion Bulls Canada

Canadians used to take pride in being Canadian citizens. We relished being seen unequivocally as a positive influence in the world. It was part of our identity that our soldiers rarely used their weapons, as almost all of their service was devoted to official “peacekeeping” missions.

Having a vast nation, with large expanses of unspoiled wilderness, we appreciated that gift – and had traditionally adopted very “green” attitudes toward preserving environments and ecosystems. At the same time, Canada had generally not only been a generous donor of foreign aid, but very proactive as an advocate for developing nations, and a “bridge” in dialogues with other developed nations.

In all those areas, Canada's reputation has been greatly diminished. Our soldiers now have a new primary mission, which is supposedly parallel with our “peacekeeping”: “kill the enemy”. It requires no explanation that increasing the latter greatly diminishes our effectiveness in the former.

Meanwhile, Canada's “image” in the world, with regard to environmental issues and policies has gone from “green” to a skull-and-crossbones, with Canada recently being awarded a “trophy” of infamy: voted the world's least “green” nation as a result of two concurrent policies. Not only has the current government essentially reneged and renounced Canada's commitment from the “Kyoto Accord”, it has laid-waste to the province of Alberta – through the reckless expansion of the Canadian tar-sands, where maximizing output has meant totally abdicating responsible management and development with respect to the environment.

Lastly, Canada is rapidly losing its favorable reputation among developing countries. This comes in a number of forms, but starts with Canada allowing itself to be a “tool” in the U.S.'s “War For Drugs” in Afghanistan – where the partnership between the CIA and local warlords has turned Afghanistan into the largest heroin-factory in global history. Wall Street banks are able to launder such drug-profits with impunity, classified under “trading profits”.

While Canada's government still mouths worthy platitudes when it comes to aiding poor and developing countries, such statements are being increasingly seen as mere rhetoric. With Canada becoming less-generous in foreign aid and less vocal and assertive as a voice for developing countries, Canada's current government now seems much more interested in currying the favor of its cronies among the developed countries, and mostly the United States.

This attitude is on display for the entire world at the current G8/G20 gatherings, where Prime Minister Stephen Harper engaged in the most fascist display of force ever seen at one of these gatherings – relative to any legitimate threat. Over $1 billion (taxpayer) dollars has been squandered in turning the heart of Canada's largest city into an armed fortress, where legions of riot-police front massive barricades.

Occasionally, a television commercial does an exquisite job of seizing upon some time-tested cliché and then uses an image which perfectly illustrates the principle in question. An example of such a commercial is the ad for Fram oil-filters, which (if memory serves me correctly) dates back to the 1970's, and ran for many years.

For the benefit of younger readers, and older readers who do not recall that commercial, I will briefly summarize it. A mechanic is standing in a garage, in front of a car which is up on a hoist. In his hand, he holds a Fram oil-filter. He holds the oil-filter up, and says, “You can pay me now...or pay me later” (as he gestures to the car on the hoist).

There are several ways we can characterize the principle being cited. One way is to say that we can behave prudently today (by buying a new oil filter for our car), or face catastrophe tomorrow (be forced to pay for an engine overhaul). An economic characterization of the principle would be to say that we can incur a small expense today in order to avoid a major expense tomorrow.

However we choose to frame the principle, one fact is clear: many members of our species never follow this advice, while almost all of us stray from this wisdom at least on occasion. Indeed, this particular human failing is so common that we have a word for it: procrastination. As a consummate procrastinator in my younger days, I fully understand this form of human weakness.

We start with a task we must perform or a problem which we know we must solve – but which we would rather avoid, due to some level of unpleasantness which we associate with the matter in question. In a moment of weakness, we make the mistake of asking ourselves a question: if I wait to deal with the matter until 'tomorrow', will it make much of a difference?

This creates a dynamic which quickly turns into a vicious circle. The reason why procrastination is such a debilitating flaw is that most problems are not so urgent that they absolutely must be attended to today. Thus, when we procrastinators ask ourselves that rhetorical question, we already know the answer: “no, waiting one more day will not make a difference.”

The big problem with that process is that many situations deteriorate at a very gradual rate. This means that if each day we ask ourselves “can I wait one more day?”, we will be able to answer that question affirmatively for a very long time. Meanwhile, the cumulative deterioration of our situation(s), caused by many days (or years) of delay can be much more serious. Few forms of cancer can make us noticeably more ill over the span of only a day, yet we are all well aware of the cumulative destructiveness of that disease.

Most economic problems evolve in a similar manner. If we deal with the problem promptly, we may escape any adverse impact at all, while if we wait too long, the problem can easily become 'fatal'. As individuals, the maturity gained by the passage of years (and often many years) eventually teaches us to avoid the vicious circle of procrastination.

Today, President Obama signed into law the historic Financial Regulatory Reform legislation package. I reviewed this in “A Done Deal” a few days ago, so I won’t restate my position here. I’m putting this short missive out to bring your attention to a new video put out by Commissioner Bart Chilton on the same issue. www.cftc.gov/files/oirm/video/cftc_023455.wmv

I sent the link earlier to a subscriber to test if he could retrieve it, and he responded that he thought that I had produced the video. I didn’t, but it was a fair observation, since the centerpiece of Commissioner Chilton’s statement affirms that the new law mandates that the CFTC establish position limits in order to prevent market concentration. Position limits in silver to break the stranglehold of concentration on the short side of COMEX silver has been my mission for 25 years. Chilton confirms that will be the law. Please watch the video and then decide if my take is correct.

According to Commissioner Chilton, it seems clear that the new law abruptly alters the former debate of whether the Commission should adopt strict position limits in COMEX silver into what the position limits in COMEX silver should be. This is a remarkable transformation. Suddenly, it’s a question of what the position limits in silver should be and when they should be enacted, not if we should have them. Some may wonder how this remarkable transformation came into being, but there is little doubt in my mind that the architect was Gary Gensler.

What should the position limits be in COMEX silver? As I have maintained for two decades, and with which almost 3000 public comments concurred, 1500 contracts is close to the proper number. I based this on real world production and consumption, world and exchange inventories, and an objective comparison of silver with all other commodities of finite supply. The case is easy to make and has been made repeatedly. Now it is up to those opposed to the 1500 contract position limit to state what the limit should be instead and why. There has been conspicuous silence on this matter to date. It is time to break the silence and initiate an honest debate. Of course, it is not just about the level of limits, but in enforcing those limits on the big shorts, like JPMorgan. I assume Commissioner Chilton wasn’t excluding JPMorgan from the new law, but he can speak for himself.

Two months ago, I wrote a commentary reporting that “the second bubble had burst” in the U.S. housing market. Roughly three weeks later, I reported that the U.S. economy had resumed its “crash”. Contrary to the reports of the mainstream media, there was absolutely no “surprise” at all to any of these developments.

I had previously written (in April of 2009) that the U.S. housing market would suffer its next collapse beginning some time in the spring of 2010. As far back as July of last year, I wrote commentaries explaining why the U.S. economy could not “recover”, followed by a plethora of commentaries simply asserting that there was no “recovery”.

While regular readers may be bored by this chronology, there is a “method to my madness”, beyond mere self-indulgence. I possess no crystal-ball, nor do I have access to any data not freely available to the rest of the media. As I observed recently, there is a very simple reason why I have been able to “see” this devolution of the U.S. economy clearly – and thus not be “surprised” by any developments: I look at long-term charts.

Most market reporters, commentators, and politicians are so genuinely incompetent that they continue to rely upon nothing but the same short-term “snapshots” which have caused them to be “surprised” by everything. However, it is a safe conclusion that even such rampant incompetence (combined with a strong “herd mentality”), could not and does not mean that the entire U.S. government remains in an oblivious state of ignorance regarding this re-acceleration of the collapse of the U.S. economy.

This begs an obvious question. Given that at least some elements of the U.S. government have known all along that the U.S. economy was not “recovering” and could not recover, why is it that only now are we hearing of tentative, new plans of more “life support” for the dying U.S. economy?

The answer is also obvious. As I pointed out when I originally denounced the Obama “stimulus package”, it was never anything more than a bad joke. The combination of the collapse of the U.S. housing sector, massive unemployment, and the largest credit-contraction in the history of the U.S. economy had combined to subtract approximately $2 trillion per year in consumer spending from this consumer economy.

The response of the Obama regime to this scenario was a one-time injection of $780 billion in “stimulus”, spread-out over more than a year. Obviously, you can’t replace $2 trillion with less than $800 billion and call it “stimulus”.

This brings us to the present dilemma of the U.S. government. The U.S. economy is much sicker than it was when Obama ascended the throne. Wall Street has continued to ruthlessly choke-off all credit to the U.S. economy, meaning that tens of millions of American households, and tens of thousands of businesses are much closer to the breaking-point than they were in January of 2009.

The entire U.S. retail sector is in a terminal death-spiral, and its only response is to eliminate vast numbers of retail outlets, and herd consumers into more on-line retailing. While this “cuts costs” for these companies, most of those cuts will be reduced employment – fueling the next leg lower for consumer demand, resulting in even more store-closures, etc, etc.

This means that the trivial “band-aids” being mused-about by government talking-heads are utterly meaningless. Simply, the Obama regime has to “go big, or go home”. It must either engage in massive (genuine) “stimulus” of the U.S. economy – meaning a multi-trillion dollar commitment, or simply allow the collapse to proceed (and feed upon itself). However, in even contemplating another, massive wave of spending, Obama faces two other problems (which he created for himself).

Throughout this “U.S. economic recovery”, the U.S. government has continued to pretend that it was “almost ready” to begin some actual, fiscal restraint – halting the exponential increase in federal government debt. That was the only thing propping-up the U.S. dollar (putting aside the constant Euro-bashing by the U.S. propaganda-machine). Allow another sickening plunge in the U.S. dollar, and that will drive away the last, few chumps still insane enough to buy grossly over-priced U.S. Treasuries. This is the road that leads to hyperinflation.

If this was not bad enough, the Obama regime has continued to be successful in duping both the vast majority of sheep in the U.S. electorate, as well as Republican knuckle-draggers that the U.S. economy was “strong enough” to begin to curtail runaway spending. This pool of chumps is looking for spending cuts, not a multi-trillion spending orgy.